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Monday, March 26, 2007

Another Interesting Read : Why Stocks are a Bargain

Why Stocks Are a Bargain
Over the long term, which are less risky for the reward they offer -- stocks or bonds?

Full article can be found on : www.kiplinger.com

By James K. Glassman
From Kiplinger's Personal Finance magazine, April 2007

As night follows day, when the stock market rises, I get phone calls from reporters who want me to talk about the book I coauthored in 1999, Dow 36,000. Just as inevitably, these reporters have not read the book and haven't the foggiest idea what it's about. What they want to know is the precise date that the Dow will hit 36,000, which I don't know now and never claimed I did.

But let's dispose of this question as we get on to more important matters.
Assume the future is like the past 80 years and the Dow produces the market's historical rate of return of a little more than 10% annually, including dividends. Also assume that dividend growth will remain at 2%, so the net price rise in the Dow will be 8%. As I write, the Dow is roughly 12,600. At an 8% growth rate, it will hit 36,000 on approximately February 14, 2021. Celebrate with your Valentine.

Risk anomaly
But Dow 36,000 was about a much more important subject than guessing when a date and a number would coincide. It was about risk. Normally, the riskier something is, the greater the payoff. The book pointed out an anomaly in investing: a situation in which the payoff is far greater even though the risk is about the same.

We examined what economists call the "equity premium puzzle," which is this paradox: Since 1926, a diversified portfolio of stocks has produced a return averaging, after inflation, about 7% a year, including dividends. Over the same period, long-term U.S. Treasury bonds have produced an average return of less than 3% a year, including interest. Stocks are much more profitable than bonds. The payoff is greater, so the risk must be higher, right?

Yet history also shows that, over the long term and after inflation, stocks are not much riskier than bonds. In fact, in his book Stocks for the Long Run, Kiplinger's columnist Jeremy Siegel, of the Wharton School of the University of Pennsylvania, presents 200 years of data in support of this conclusion: "Although it might appear to be riskier to hold stocks than bonds, precisely the opposite is true. The safest long-term investment for the preservation of purchasing power has clearly been stocks, not bonds."

In a common professional judgment, Nicholas Barberis, of Yale University, says, "By any standard measure of risk used by economists, stocks do not appear to be that much riskier than bonds." So what's the explanation for the paradox? Why does one asset return more than another -- that is, provide investors with a "premium" -- if the risk is nearly equal? In a paper co-written with Ming Huang, of Cornell University, and Tano Santos, of Columbia University, Barberis points to behavioral psychology as an explanation. Most investors, he says, are averse to losing money and see stocks, at least in the short run, as being more risky. So they demand a premium -- that is, a higher return.

What this means to you is simple: Own stocks for the long run and profit from other people's misconceptions. By long run I mean at least five years and, even better, ten or more. Stocks are far riskier than bonds in the short term, and that risk can't compensate for the higher average returns. Stick with bonds if your timeline is shorter than five years.

article continues here :
http://www.kiplinger.com/magazine/archives/2007/04/glassman2.html

Thursday, March 22, 2007

Live rich, retire richer - extract of article from CNN.com/money

Read an interesting article recently ....... for sharing :)

It just may be possible to have it all. Business 2.0's guide shows you how to live large now - and bankroll your future.

(Business 2.0 Magazine) -- We all know the drill: To make sure you have enough green for your golden years, you're supposed to max out your 401(k) contributions, invest in index funds and growth stocks, and not - repeat, not - splurge on that top-of-the-line Ferrari. All sound advice.
But where's the fun in that? And what about now, when you're actually, you know, living your life?

Well, we believe it's possible to both live the good life and turbocharge that retirement account. In the articles linked below, you'll find ideas for investments and startup opportunities you won't see reported in the business section of your daily newspaper.
Like locking up rights to wind-farm and solar-power sites and then leasing them back to renewable-energy companies. Or snapping up a sampling of the works of today's underground artists for a surprisingly quick and profitable payoff. Or investing in real estate in places where supermodels lounge on the sand and beach houses can still be had for six figures or less. Want a preview? Aim Google (Charts) Earth at Punta del Este, Uruguay.

Maybe you'd like to go into business for yourself, or just want to ride the next wave. Think organic fast food, online luxury-goods rentals, and pet health insurance. And take a look at cooking schools for kids and upscale retirement communities.

Sure, your accountant might raise her eyebrows, but that's OK - while you're waiting for your 401(k) balance to grow, nothing says you have to sit around and watch the grass grow too.

Consider these five options:
Going global: Buy real estate in exotic locales.
Power play: Snap up rights to wind and solar sites.
Collecting profits: Invest in unknown artists.
Getting on the farm: Cash in on these crops.
Franchise this: Be your own boss.

Enjoy ! Article can be found here

Wednesday, March 07, 2007

the weather

it's march and the last week or so, temperature has been ard mid-20s ... in fact i was feeling kind of dreadful that summer is coming and really wasn't looking to the hot and humid days that lies ahead.

and of course ....... expecting the higher temperatures ahead, i've already packed most of my winter clothing and guess what???!! it turned cool yesterday and today. Today it even reached 11 degrees ...... and me ...... i didn't want to bring out my winter clothes (most of which i've washed, folded and put away) .... i decided to wear hubbie's... hehehe. he is away and he had one woolly sweater hanging around ;)

dunno how the weather is going to be tmr .... but this sudden cool and warm temperature is not very comfortable .... not sure u know what i mean ..... it's like i'm juz getting used to the warmness and then suddenly, it's cool again ......hehehehe ...... but of course i like the cooler weather better ...... :)

actually, the weather a bit like the stock market in recent days ah ....... i think tomorrow is going to be another exciting day ....... :)

gooood nite .

Thursday, March 01, 2007

not too late for a chinese new year greeting :)

hello everyone!

Gong Xi Fa Cai

Kong Hei fatt Choy

Xin Nian Kuai Le

Happy Lunar New Year

I know i am kind of late with my new year greetings .... but heyz .... at least it's within the 15 days of the lunar new year ;) hehehehe.

am feeling kinda lazy these days ...... less blogging ;p

plus, the markets have been crazy and the volatility is already giving me enough excitement in my life. wellz, not that i'm profiting from it ...... but the lessons i learnt, i hope will do me good in the longer term :) yea ...... that's my goal ....... i hope i won't be disappointed.

anywayz, that's all for now. check back soon!